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Discuss // What is the best option for expanding our business to the US -commission based, equity based, both?

What is the best option for expanding our business to the US -commission based, equity based, both?

We
are a tech company that started an Ad and Market Research platform in Mexico,
business is going well, but we have conducted research in the US and concluded
lot of potential for our business.

Even
though we are close to the US we lack know-how for sales to marketing professionals
(our company focuses on CMO?s).

Since
we started business, our model has been to keep a strong IT and Sales team,
with the difference that our sales team is paid via commission and annual gross
%. We want to keep the same retribution model for the US market.

Average
sale is in the 120k - 200k per customer, so commission + gross % makes sense
for us.

Is
this enough for the US sales force market? Do we need also to give sweat equity
of our US operation?

9 Replies

If you're talking about ad-tech, then you need to do business in the US.

I don't know much about the space. But here are a couple things I noticed from your post:

- You want to hire sales people in the US... but you don't know the US market well. Given you already have some traction with your product, you should invest in getting to know the local (US) market first. Don't just throw sales people at is without first understanding more about it.

- The US market is very hot right. You might be able to find someone who is willing to work for just commission... but it is unlikely. In particular, given your deal-size of 120k-200k per customer... you don't want a recent grad out of school with no experience. Plus, if the deals are of that size, you should be able to afford it. Typically in similar companies in the US, salespeople's compensation is 60-40, 50-50 or even 40-60.

On a different note - great to know of Mexican companies targeting the US market. Bienvenidos!

Rodrigo, also thank you on your fast reply, let me elaborate on each pointer you kindly posted.

- You want to hire sales people in the US... but you don't know the US market well. Given you already have some traction with your product, you should invest in getting to know the local (US) market first. Don't just throw sales people at is without first understanding more about it.

------- Excellent point, but just to expand further our dilemma, we?ve already conducted a research in the U.S., mainly focused on the market potential, but we do not know the "decision making" process for sales in our market segment. This know-how is naturally embedded in sales persons that address the marketing industry in the US, and I believe for this know-how to be "acquired" by our company will drain more resources and time. Being our core an ad-tech company we have to move fast and evolve our tech services, I believe that focusing on learning this know-how will shift our objective of innovating as an ad-tech company, What do you think?

- The US market is very hot right. You might be able to find someone who is willing to work for just commission... but it is unlikely. In particular, given your deal-size of 120k-200k per customer... you don't want a recent grad out of school with no experience. Plus, if the deals are of that size, you should be able to afford it. Typically in similar companies in the US, salespeople's compensation is 60-40, 50-50 or even 40-60.

------- Thats right!, our sales are focused on marketing reps, so our sales reps need to have experience in said market. that is why I think a good option is to propose an integrated compensation with commission, what are your thought on this matter?.

Thank you all for your replies, this is a very helpful entrepreneur discussion board.

Being in business development and marketing/sales field including my own company, I found it hard to find sales person just on commission specially at the beginning. Although I found them, it didn't work out good for me.

You have to set up some sort of compensation plan including base and other benefits unless you assign agents or this sort work for you managing the sales team through them. So, it's best to test the water first before you fully dive into it with whatever plan you have in your mind.

As per my view, the option to compensate your sales team would depend upon your brand value as well.

If you are a starter then the brand value would not be much so compensation plan for the team should include both - however major portion can be the equity based and commission portion may be kept small.

As the business would grow, more and more people would be ready to work for you and you can go for fully commision based compensation plan.

Average sale value is high, so likely best to look at partnering with a
firm big enough to smooth the cashflow lumps out. That likely suggest a JV
of some kind. My instinct would be to look for a territorial partner
arrangement, exclusive upon meeting performance targets.
You may get a franchise payment up front, to show commitment.
A

Director at PetHero, SPC - Member at Eastside Incubator - Principal at Tuxedo Technologies Group

Alberto;

Your average deal size lends itself well to direct sales via dedicated enterprise sales reps. Knowledge of the US market as you have noted is key. If you believe the US market should/could be your largest opportunity I would look closely at bringing on an experienced enterprise (meaning documented sales success in your target markets closing comparably sized deals with your target prospects) sales rep with some sort of equity kicker in addition to a commission plan. You want them to have an ownership interest beyond just a financial interest in your success. You certainly can find high-quality enterprise sales people who will perform well for commission only, but that narrows your field of available candidates, but if you simply can't afford a base + commission plan then you will simply need to work around that limitation - not insurmountable. VERY important to hire only a VERY high-quality person with an impeccable track record and impeccable credentials - you are operating with a deficit as you are not US-based and US customers will need to get comfortable with the legal limitations (what is their recourse if something goes sideways), etc. seems to me This first US sales hire should be someone who can grow into a management role.

My best advice is to find a couple of rep organizations to start with, in key geographies. While you can study the market from afar, you need "feet on the ground" who have the experience in it. Rep relationships will limit your investment to the training necessary (and don't skimp on that) and you can offer exclusivity in territories when the rep group hits certain periodic (monthly or quarterly) sales targets. And you don't need to offer equity. But, if one or more of the relationships is successful, you might, in the future, might want to look into a more permanent relationship through partnering, joint venture, or even outright acquisition. Just some thoughts. Hope they help.

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